Mike DelPrete a real estate tech strategist lays out how “mega-trends” in the real estate industry is why it’s moving so fast in 2021.
#1 Portals Moving Closer to the Transaction
A few example so this are Zillow, and realestate.com. Zillow bought a mortgage company so they could get more involved in the transaction side of the business. iBuyer is also getting into the transactions of buying and selling homes.
“This is how they grow. This is where new revenue opportunities are. It’s a big shift in that direction,” says DelPrete.
They can also use this model to lead to them being able to talk to the customers. They are going from lead generation to talking to and qualifying those leads. They are getting closer to the buyers.
Zillow started hiring their own agents a year ago for its iBuyer program. They are competing with the customers, the agents. Redfin 5x higher than the rest of the industry average in this process of being a portal that allows them to be closer to the transaction, but they are also a brokerage which is unique. — all of their agents are employees. Which leads us to megatrend #2.
#2 Agents as Employees
The real estate tech companies are hitting the market and hiring their own agents. They are employees not 1099s. It’s all about control. They can standardize the customer experience. It gives the company operational efficiency (ex. Redfin model). They can streamline the process, and they get better economics (Zillow vs Opendoor). Zillow will see better economics by not paying a commission to an outside agent.
#3 New Models (iBuying) are Here to Stay
Although iBuyer companies saw a 50% decline in 2020, a lot of that has to do with more competition from hitting the market. Zillow’s market share gained when they entered the market and began pulling from Opendoor.
Opendoor went public. They aren’t going anywhere anytime soon. They have a plan to reach $50,000,000,000 in revenue. They are trying to explode not just survive.
“As of now, the iBuyer programs are losing a lot of money, but one of the ways they are looking to make money is through adjacent services. They do this by offering title and mortgage insurance.”
#4 The Battle for Adjacent Services
All of these companies are working to become more profitable by selling consumers more adjacent services. They consider selling title insurance are easy part of the plan. You can see another example of this by looking at Opendoor’s “no hassle listing” service. Offerpad is beginning to offer the same thing.
#5 Asymmetric Disruption
“Many disruptors are playing by a different set of rules, because they don’t have to be profitable just yet to attract investors. This will be one of the biggest trends throughout 2021. The investor money will prop up failing businesses in an effort to gain market share. You are competing against businesses that do not have to make money.”
